Question 1

In choosing a form of business organization for a new enterprise, important factors include tax considerations.

Accepted Answer

A) True 
 B)False  True

Question 2

Ken owns and operates Living Earth Garden Shop as a sole proprietorship. When Ken dies, Living Earth will automatically

Accepted Answer

A)  ​dissolve. 
B)  ​pass to Ken's heirs. 
C)  ​pass to the state. 
D)  ​be offered for sale to its creditors and competitors. 
A)  ​dissolve. 
B)  ​pass to Ken's heirs. 
C)  ​pass to the state. 
D)  ​be offered for sale to its creditors and competitors. A

Question 3

A sole proprietor does not own the entire business.

Accepted Answer

A) True 
 B)False  False

Question 4

A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).

Accepted Answer

A) True 
 B)False

Question 5

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Accepted Answer

A)  ​other Genuine Asian franchisees within the same state. 
B)  ​Fong. 
C)  ​Genuine Asian Sushi House. 
D)  ​the Federal Trade Commission. 
A)  ​other Genuine Asian franchisees within the same state. 
B)  ​Fong. 
C)  ​Genuine Asian Sushi House. 
D)  ​the Federal Trade Commission.

Question 6

State deceptive trade practices acts apply to actions by franchisors.

Accepted Answer

A) True 
 B)False

Question 7

Frank enters into an agreement with Grab n' Eat Burgers, Inc., to operate a franchise in Homeville. Later, the franchisor grants franchises to others within the same territory, causing Frank to suffer a significant loss in profits. In Frank's suit against the franchisor, his best argument is that Grab n' Eat

Accepted Answer

A)  ​violated the antitrust laws. 
B)  ​violated the implied covenant of good faith and fair dealing. 
C)  ​violated the Federal Trade Commission's Franchise Rule. 
D)  ​granted Frank the first Grab n' Eat franchise in Homeville. 
A)  ​violated the antitrust laws. 
B)  ​violated the implied covenant of good faith and fair dealing. 
C)  ​violated the Federal Trade Commission's Franchise Rule. 
D)  ​granted Frank the first Grab n' Eat franchise in Homeville.

Question 8

The franchise agreement may specify whether the premises for the business must be leased or purchased outright.

Accepted Answer

A) True 
 B)False

Question 9

Flynn buys a Greasy Burger, Inc., franchise. Greasy requires that its franchisees buy its products exclusively for every phase of their operations. Because Flynn wishes to buy less expensive products, he challenges the requirement. His best argument is probably that the requirement violates

Accepted Answer

A)  ​the implied covenant of good faith and fair dealing. 
B)  ​the Federal Trade Commission's Franchise Rule. 
C)  ​federal antitrust laws. 
D)  ​the franchisor's marketing image. 
A)  ​the implied covenant of good faith and fair dealing. 
B)  ​the Federal Trade Commission's Franchise Rule. 
C)  ​federal antitrust laws. 
D)  ​the franchisor's marketing image.

Question 10

Fact Pattern 36-1​
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
-Refer to Fact Pattern 36-1. Before a franchise contract is signed, Jumbo Juice must explain

Accepted Answer

A)  ​the contract's termination provisions. 
B)  ​the nature and operation of a franchise. 
C)  ​the laws governing franchising. 
D)  all of the choices. 
A)  ​the contract's termination provisions. 
B)  ​the nature and operation of a franchise. 
C)  ​the laws governing franchising. 
D)  all of the choices.

Question 11

Anyone who does business must create a separate business organization.

Accepted Answer

A) True 
 B)False

Question 12

Haute Dogs, Inc., sells a franchise to Irene's Cuisine, a lunch truck. Irene's Cuisine is​

Accepted Answer

A)  ​a franchisee. 
B)  ​a franchisor. 
C)  ​a partner. 
D)  ​a principal. 
A)  ​a franchisee. 
B)  ​a franchisor. 
C)  ​a partner. 
D)  ​a principal.

Question 13

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Accepted Answer

A)  ​balance the rights of both parties. 
B)  ​emphasize the right of Pro Club to its business operation. 
C)  ​focus on the right of Oberon to be dealt with fairly. 
D)  ​underscore the interest of consumers in affordability. 
A)  ​balance the rights of both parties. 
B)  ​emphasize the right of Pro Club to its business operation. 
C)  ​focus on the right of Oberon to be dealt with fairly. 
D)  ​underscore the interest of consumers in affordability.

Question 14

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

Accepted Answer

A) True 
 B)False

Question 15

Del owns Everlast Painting, a sole proprietorship. Del's liability is

Accepted Answer

A)  ​limited by state statute and varies from state to state. 
B)  ​limited to the extent of capital expenditures. 
C)  ​limited to the extent of his or her original investment. 
D)  ​unlimited. 
A)  ​limited by state statute and varies from state to state. 
B)  ​limited to the extent of capital expenditures. 
C)  ​limited to the extent of his or her original investment. 
D)  ​unlimited.

Question 16

A number of states require franchisors to provide presale disclosures to prospective franchisees.

Accepted Answer

A) True 
 B)False

Question 17

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Accepted Answer

A)  ​a chain-style franchise. 
B)  ​a distributorship franchise. 
C)  ​a manufacturing franchise. 
D)  ​not a franchise. 
A)  ​a chain-style franchise. 
B)  ​a distributorship franchise. 
C)  ​a manufacturing franchise. 
D)  ​not a franchise.

Question 18

Most franchise contracts provide that notice of termination must be given.

Accepted Answer

A) True 
 B)False

Question 19

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

Accepted Answer

A) True 
 B)False

Question 20

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Accepted Answer

A)  ​a bank loan. 
B)  ​a Small Business Administration Loan. 
C)  ​a state grant. 
D)  ​any of the choices. 
A)  ​a bank loan. 
B)  ​a Small Business Administration Loan. 
C)  ​a state grant. 
D)  ​any of the choices.

Exam 36: Small Businesses and Franchises

In choosing a form of business organization for a new enterprise, important factors include tax considerations.

Ken owns and operates Living Earth Garden Shop as a sole proprietorship. When Ken dies, Living Earth will automatically

A sole proprietor does not own the entire business.

A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

State deceptive trade practices acts apply to actions by franchisors.

The franchise agreement may specify whether the premises for the business must be leased or purchased outright.

Flynn buys a Greasy Burger, Inc., franchise. Greasy requires that its franchisees buy its products exclusively for every phase of their operations. Because Flynn wishes to buy less expensive products, he challenges the requirement. His best argument is probably that the requirement violates

Fact Pattern 36-1​ Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. -Refer to Fact Pattern 36-1. Before a franchise contract is signed, Jumbo Juice must explain

Anyone who does business must create a separate business organization.

Haute Dogs, Inc., sells a franchise to Irene's Cuisine, a lunch truck. Irene's Cuisine is​

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

Del owns Everlast Painting, a sole proprietorship. Del's liability is

A number of states require franchisors to provide presale disclosures to prospective franchisees.

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Most franchise contracts provide that notice of termination must be given.

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Business and the Constitution

Business Ethics

Tort Law

Strict Liability and Product Liability

Intellectual Property Rights

Internet Law, Social Media, and Privacy

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Writing Requirement in Our Digital World

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance and Breach of Sales and Lease Contracts

Warranties

International and Space Law

Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

All Forms of Partnerships

Limited Liability Companies and Special Business Forms

Corporate Formation and Financing

Corporate Directors, Officers, and Shareholders

Mergers and Takeovers

Investor Protection, Insider Trading, and Corporate Governance

Administrative Agencies

Consumer Law

Environmental Protection

Antitrust Law

Professional Liability and Accountability

Personal Property and Bailments

Real Property and Landlord-Tenant Law

Insurance

Wills and Trusts

The Legal Environment of Business

Torts and Crimes

Contracts and E-Contracts

Domestic and International Sales and Lease Contracts

Negotiable Instruments

Creditors Rights and Bankruptcy

Agency and Employment

Business Organizations

Government Regulation

Property and Its Protection

Fact Pattern 36-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. -Refer to Fact Pattern 36-1. Before a franchise contract is signed, Jumbo Juice must explain

Haute Dogs, Inc., sells a franchise to Irene's Cuisine, a lunch truck. Irene's Cuisine is